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DISH to Launch Satellite Internet

DISH Network Corp.(DISH - Free Report) – the second largest satellite TV operator in the U.S., has announced to launch satellite-based broadband service in the rural U.S. market starting from October, this year. DISH Network will become the first satellite TV provider in the U.S. to provide satellite net services in the rural areas as arch rival DIRECTV plans to launch similar services in 2013.

Bundled with its popular satellite TV packages, the 10GB data plan will offer a download/upload speed of 5/1 Mbps and will charge its customers $39.99 per month. Customers can upgrade to a higher 20GB data plan, which provides a download/upload speed of 10/1 Mbps and costs upto $49.99. New and existing bundled customers will save $10 per month and won’t have to provide any installation charge, while stand alone customers have to pay an upfront fee of $99.

The company will use a satellite of EchoStar Corp. (SATS - Free Report) to deliver this service. DISH Network is already providing satellite Internet service using the network of ViaSat Inc. (VSAT - Free Report) in certain parts of the U.S. particularly in the West Coast. Both the existing and new services will be offered under the dishNET brand. According to Federal Communication Commission (FCC) 14.5 million rural people doesn’t have access to high speed internet. The Englewood, Colorado-based company is trying to capture 2 million new customers with these services.

We believe, with the launch of this service DISH network will become a formidable challenger to large cable pay-TV and telecom service providers, which also offers triple-play video, voice, and data services. Furthermore, the launch of this service will allow it to diversify as the U.S. satellite market is already saturated.

Additionally, DISH Network is currently waiting for the FCC nod to launch a nationwide high-speed wireless broadband network to offer mobile Internet and phone services to its customers. If the company gets the green signal from FCC to use its airwaves then the company can offer a unique quad-play bundled service of satellite TV; satellite Internet, mobile Internet, and mobile phone services.

The current Zacks Consensus Estimate for Dish Network Corp. is pegged at 55 cents for the third quarter with a growth rate estimate of (22.63%). For 2012 and 2013, the Zacks Consensus Estimates stand at $2.43 and $2.50 with a growth rate of (16.08%) and 3.21%, respectively.

Recommendation:

Currently, DISH Network has a Zacks #3 Rank, implying a short-term Hold rating on the stock. We are also maintaining our long-term Neutral recommendation on the company’s shares.

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